The Open House Blog

Brillant Advice from Mark Hanna

2009-04-24T09:33:00.001-07:00

Here's some brilliant advice from one of my favorite bloggers, Mark Hanna, on recruiting:

No, not the one where you recruit somebody if they fog a mirror. This is
the one where you look yourself in the mirror and say, "Yep, I've done
everything I said I would do!"I sat down to write this week's blog and started
going through the archives and as I was reading them it occurred to me that I
have written about one and a half dozen action items that you could/should be
doing. In addition, so many of you have responded postively saying, "Yes! I'll
do that." or "I'm going to begin that next week!"Well, how have you done? Did
you make a commitment and follow through with it, or did you allow someone or
something to steer you off course? Here's a list of some of the items, programs,
initiatives that I've written about since the first of the year. Have
you:
Eliminated (or greatly reduced) print advertising?
Reviewed and
managed the WLN leads at least weekly?
Begun (planned to begin) the "Make
Your Market" campaign?
Aggressively recruited brand new agents?
Purchased and use a Flip or similar video camera?
Instituted and/or
enforce minimum activity standards?
Instituted and/or enforce minimum
production standards?
Instituted and/or enforce professional standards?
Completed a written Business Plan (even if it's the mini-plan in the
Weichert Reporting System)?
Started a blog?
A regularly scheduled i-Call
session each week?
Complete the weekly and monthly information in the
Weichert Reporting System?
Started using "Vyew" for Internet-based
presentations?
Begun to routinely manage price improvements?
Moved the
bottom 1/3 of your agent roster?
Made everyday a "Shay Day"?
If some of
these are not familiar to you, please go through the blog's archives and, if you
need additional help or information, contact your Regional Service Manager or
Business Development Consultant.

BRAC Relocation Brings Good News for Potential Homeowners

2008-01-17T08:26:00.000-08:00

Those affected by relocation assignments from the Base Realignment and Closure Commission are finding great news upon arriving in their new city: they can afford to own a home.

While the national housing market is experiencing a slowing in growth, some local markets are booming, unaffected by dour predictions for the economy. As a result, individuals and families affected by BRAC are finding it easier to become homeowners, and many are surprised to find out what kind of home they can afford.

The housing market in Huntsville, Alabama is one such example. Redstone Arsenal in Huntsville is the relocation site of AMC headquarters and USASAC. The average sales price of a home in Huntsville is $189,813. Using the Home Price Comparison Index, a home of this price is equivalent to a $417,756 home in Woodbridge, Virginia, a $694,994 home in Alexandria, Virginia or a $725,376 home in Washington, DC. When asked about the average home prices in the areas around Fort Belvoir, Kathy Stark, a Northern Virginia REALTOR®, estimates the average townhouse price to be $350,000. Stark says that the average price for a modest single-family home would be between $600,000 and $650,000. Needless to say, the Huntsville housing market is a bargain.

Brenda Elliott, broker/owner of WEICHERT, REALTORS® - The Executive Group and veteran Army wife, explains the perks of relocating to an area like Huntsville. “When my husband retired from the Pentagon, we moved to Huntsville with his new job. This area is growing rapidly, which makes it a really great time to invest in real estate.”

Elliott is not understating the growth of the area. 10 years ago, the average sales price for a home in the Huntsville market was $115,518, and there was just over $196 million in real estate sold. In 2007, residential real estate in Huntsville was a $581 million industry.

“The market is hot, and houses are selling quickly,” says Elliott. “This is great news for sellers, but it’s also good news for potential buyers, because Huntsville real estate is a smart investment. This growth shows no sign of cooling. In 1997, the average time a house stayed on the market was 169 days. In 2007, our average number of days on market was 68.”

There are also options for those looking to super-size their living situation. “There are several neighborhoods with luxury homes where just the lot can start at $200,000” says Elliott. “For people looking in the $400,000 to $700,000 range, Huntsville has many options.”

Sounds like great news for those relocating, but what about people staying in Northern Virginia?

“The Huntsville real estate market has some great investment properties, and many sales agents in the area work exclusively with out-of-town investors” says Elliott.

Huntsville is also an attractive option for those looking to own a second home. The area has many amenities, including courses on the critically acclaimed Robert Trent Jones Golf Trail located in the Hampton Cove area. The Hampton Cove RTJ facility has 54 holes, including 36 championship holes and an 18-hole short course. The Huntsville Museum of Art offers diverse programming, from an Italian Renaissance exhibit from the Uffizi Gallery in Florence, to a salute to 20th century American music with portraits by photographers such as Annie Liebovitz and Philippe Halsman.

For those more interested in shopping, the new Bridge Street Towne Center is a retail experience not to be missed. Bridge Street bills itself as a mixed-use lifestyle center, with 550,000 square feet of retail, office and hotel space on 100 acres. Designed by a development firm from Los Angeles, this open-air environment is styled to resemble an Italian village, with gondolas floating on waterways amidst the designer boutiques, luxury movie theatre and future site of the Westin Hotel. Bridge Street’s L.A.-based design company, O&S Holdings, predicts that “lifestyle centers,” such as this, are the future of retail.

Huntsville is certainly not short on activities, including the Huntsville Symphony Orchestra, Broadway Theatre League, Botanical Garden, Space Camp and Concerts in the Park, a summer outdoor concert series. Huntsville also has the Big Spring Jam, a three-day outdoor concert festival that draws 230,000 attendees to view performances by artists such as Destiny’s Child, KC & the Sunshine Band, Blues Traveler and Taylor Swift.

Huntsville’s growing industry also makes it a great place to invest. In addition to the U.S. Army’s Redstone Arsenal, Huntsville is home to the NASA Marshall Space Flight Center and Cummings Research Park (CRP). CRP is one of the world’s leading science and technology business parks. CRP covers 3,843 acres and hosts Fortune 500 companies, local and international high-tech enterprises, US space and defense agencies and higher-education institutions. It is the second largest research and technology park in the United States and the fourth largest in the world. The Association of University Research Parks (AURP) ranked CRP as the Most Outstanding Science Park in the World. There is still 500 acres available for development, meaning there is still much expansion to be seen in this area.

Nearly every major U.S. aerospace corporation is represented in Huntsville, with 90+ companies employing more than 11,000 people in the local aerospace industry. Huntsville also plays a role in the U.S. Army’s technology development programs, with military and support contract employment reaching over 32,000.

Those who have previously relocated from Northern Virginia to Huntsville say they could not be happier with their new city. “Huntsville has so much to offer” says Elliott. “It’s a big city with a community spirit.”

Real Estate and Astrophysics

2008-01-17T08:17:00.000-08:00

It’s been recently reported that an act of galactic violence never before witnessed by astronomers is occurring a few galaxies over, and while reading the story, I couldn’t help but think of the housing market.

According to astrophysicists tracking the event, a massive black hole at the center of a distant galaxy is attacking a smaller nearby galaxy using a jet of highly charged radiation. (How rude!) Black holes are areas of highly concentrated mass that exist in space. Just as the Earth has a gravitational pull that keeps us firmly planted on the ground due to its mass, black holes have a strong gravitation pull as well. There is one slight difference here though: escape velocity – the speed required to “escape” the gravitational pull of the mass in question. The Earth has an escape velocity of 25,000 mph. In order to launch an object into space from Earth, the space shuttle/rocket/paper airplane, has to go 25,000 mph or faster. The moon, a much smaller mass, has an escape velocity of 5,300 mph. A black hole’s escape velocity is faster than the speed of light. Therefore, nothing, not even light, can escape a black hole.

How are black holes created? The gravitational collapse of a star is the most common origin for this phenomenon, but scientists say black holes can be created using a particle accelerator. While experts say the chances of planetary annihilation resulting from an artificially induced black hole are miniscule, alarmist organizations such as the Lifeboat Foundation claim the danger is so imminent, we should establish “self-sustaining colonies elsewhere.” I’ll add that to my “To Do” list, but first, I’ll explain what all this has to do with real estate.

The ability to “artificially induce” a black hole makes me think of an economic concept we’ve heard a lot about lately: recession. I think that there are two types of recessions: naturally occurring recessions as economies go through normal cycles, and induced recessions, caused by fear and panic that something bad will happen.

While it is heavily reported that we are teetering on the verge of recession, this is a media succubus manufactured by scaremonger tendencies that drive content on slow news days. “Let’s see…no new information on Israel and Palestine? Hmmmm…we could report about the 375 people running for president…no, no…Wait! The housing market! Let’s talk about how bad it is! Go get an old lady who just lost her home! She’ll be great on camera!”

If you don’t believe me, you’ve never been in a newsroom staff meeting pitching story ideas.

On Thursday, December 20, 2007, the U.S. Commerce Department made an astounding discovery: things aren’t as bad as we thought. The final numbers on third quarter GDP have been reported, and the Gross Domestic Product increased 4.9%. This number is unchanged from the estimate made a month ago.

Meanwhile, media pundits are scratching their heads, asking, “Well…how did that happen? Are you sure about those numbers? Let me see that report again…”

As a result of this “surely you must be kidding” reaction from the press, the GDP statement has been reported with much skepticism and the good news is buttressed by “howevers” and “be that as it mays.”

The Associated Press article on the GDP release is a brilliant example of how to deliver good news in a way that hurts: “The U.S. economy sprinted ahead at its fastest pace in four years during the summer, although it is expected to limp through the final three months of this year as the housing and credit debacles weigh on individuals and businesses alike.”

The confusion over the 2007 third quarter good news dates back to late in 2005, when reports of housing market Armageddon started appearing.

December 8, 2005 – USAToday: “Sustained decline forecast in U.S. housing market”
February 28, 2006 – ABCNews: “Homes Sales Down: Is the End Near?”
May 5, 2006 – FORTUNE Magazine: “Welcome to the dead zone” Real estate survival guide: The great housing bubble has finally started to deflate, and the fall will be harder in some markets than others.
August 24, 2006 – The Big Picture: “Is a Housing Crisis Approaching?”
August 27, 2006 – The Washington Post: “The Housing Crisis Goes Suburban”
September 7, 2006 – USAToday: “Realtors forecast what home builders know: Home sales this year will tumble.”
September 14, 2006 – USAToday: “More Fall Behind on Mortgages”
November 2, 2006 – CNN Money Magazine: “Slow-market crisis: Stuck with two homes” Imagine you buying your dream home only to discover you're unable to sell your current one.
January 25, 2007 – MSNBC: “Has housing market bottomed out?” The final housing numbers for 2006 are in, and they confirm what anyone who bought or sold a home last year has suspected: It was the worst housing slump in nearly two decades.
April 2, 2007 – The Boston Globe: “Housing Crisis Comes Knocking”
March 11, 2007 – The New York Times: “Crisis Looms in Market for Mortgages”

While there is no doubt that many factors may have contributed to the deflation of confidence in the housing market, there is one constant factor in this supposed “crisis”: people who keep saying we’re in a crisis. If you tell everyone something is real enough times, they will start to believe it. The Earth is flat, women can’t do math, and the housing market is crashing.

So what exactly is the escape velocity that we need to propel ourselves out of the clutches of this artificially induced black hole? How do we fight a fake recession? Education at light speed! Stephen Hawking hypothesized that black holes can eventually evaporate. Maybe this fake recession will evaporate if we refuse to acknowledge that it exists.

What does the Fed mean?

2007-12-13T11:47:00.000-08:00

As any economist will tell you, the statements by the Federal Open Market Committee (FMOC) on the federal funds rate are cryptic, and purposefully so. In attempting to decode the press release, economists and the business press turn into what seems like a gaggle of girls performing a post-date analysis for a sorority sister: “When he said he liked you, did that mean he ‘liked you’ liked you, or just liked you?”

At the risk of likening Ben Bernanke to my ex-boyfriend, he has communication issues. The FMOC has 12 voting members, comprised of selected Federal Reserve Bank presidents and seven Fed governors, and has eight regularly scheduled meetings a year. After each of these meetings, a carefully crafted press release is issued to the public at 2:15p.m. on the day the FMOC meeting concludes. This statement contains the results of the deliberations of the meeting, and is about as extensive as Susan Lucci’s Emmy collection. The Fed uses the same format for the release each time, causing economists to intensely analyze words and phrases that were omitted from the current release. It barely fills a single page and contains virtually no numbers; it’s brevity leaves much room for interpretation by the media, and everyone is trying to figure out one thing: How does the Fed presently perceive the economy?

At the risk of getting trampled in the mêlée, we’re going to jump right in and do a little of our own interpretation, independent of the opinions from the news media (after all, turning to The New York Times for their opinion is like listening to the best friend who says you looked good with the perm).

The Federal Reserve Release is as follows (with my notations added in bold):
“The Federal Open Market Committee decided today to lower its target for the federal funds rate 25 basis points to 4-1/4 percent. (The function of this sentence to summarize the outcome of the FOMC vote on interest rates – as a note, September was the first time the central bank dropped the funds rate in four years.)

“Incoming information suggests that economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending. Moreover, strains in financial markets have increased in recent weeks. Today’s action, combined with the policy actions taken earlier, should help promote moderate growth over time.
(This brief section describes the economy’s current state based on the latest economic indicators.)

“Readings on core inflation have improved modestly this year, but elevated energy and commodity prices, among other factors, may put upward pressure on inflation. In this context, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully. (The preceding and the following paragraphs are the most carefully studied in the release. This part highlights the Fed’s assessment of inflation and growth. What trends do they display, and what are the underlying forces that propel both?)

“Recent developments, including the deterioration in financial market conditions, have increased the uncertainty surrounding the outlook for economic growth and inflation. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.
(This paragraph is more forward-looking and offers some insight into what the FOMC will monitor most closely between now and the next meeting. Here’s where economists and investors get a sense of what the Fed will be inclined to do when it meets next.)

“Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman;…and Kevin M. Warsh. Voting against was Eric S. Rosengren, who preferred to lower the target for the federal funds rate by 50 basis points at this meeting.
(This lists the names of FOMC members who participated in the meeting that morning and how they voted. Generally speaking, participants on the FOMC will align their votes with that of the Fed chairman. On matters as important as setting interest rates, the preference is to have unanimity among the members. There are occasions when certain participants disagree so strongly with the Fed chairman’s recommendation that they will formally register their disapproval. (this release, for example))

“In a related action, the Board of Governors unanimously approved a 25-basis-point decrease in the discount rate to 4-3/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, and St. Louis.” (This statement is not typically included, but September, October, and December’s releases have all seen similar actions. The discount rate is the interest rate banks must pay when they borrow from the central bank. The discount rate cut is intended to alleviate liquidity issues many banks are now facing.)

The rationale behind the lower rates is that it will induce consumers and businesses to boost spending, which will invigorate economic activity. Therefore, the solution to what seems to be a slowing economy is speeding up the economy (wow, sounds so simple, and yet…). “But Erica, I’m scared!” I hear you saying. “I keep hearing the economy is so bad,” you nervously say. In that case, have you heard that from July through September, the economy logged its best growth in four years? I bet you didn’t. Ignore what you hear and get out there and invigorate that economy! (Besides, it’s better idea than getting a perm)

Recession is Unlikely

2007-11-19T20:43:00.000-08:00

According to Giles Keating, Head of Global Research for Credit Suisse a recession in the United States is unlikely. While the U.S. economy is slowing down, fears of a market collapse are over-rated.

Below is an interview Joy Bolli conducted with Giles:

Joy Bolli: What is your take on the world economy at the moment?
Giles Keating: The world economy is not in bad shape at the moment despite the credit crisis. The latest data suggests there is a slowdown underway in the US and in Europe as well, which has hit a bit faster than expected. And, China and Asia are still booming. Even those slowdowns in Europe and America are looking unlikely to turn into recession, so the outlook at the moment is not unhealthy.

Is Switzerland also affected by this slowdown?
Well, Switzerland can't be immune because it is a big exporter, but overall I think the Swiss economy is looking pretty healthy. The likelihood is therefore that Switzerland will see a period of slightly slower growth, but the risk of it coming anywhere near recession are extremely low. Perhaps within nine months, or in even less time, we will see things accelerating again.

You mentioned Asian growth. How long can this growth be maintained in the wake of the US slowdown?
It looks, at the moment, that Asia will be relatively unscathed by the US slowdown. Given that we are not seeing the US go into an outright recession, and with US demand growth easing back a bit, the effect on Asia will not be overwhelming. In fact, it might help to reduce Chinese growth from almost 12 percent down to almost 10 percent, and that would still be a very rapid growth rate.

And how is that ongoing Asian boom impacting other regions?
The impact is profound. Throughout Asia, whether India, China or some of the smaller economies in the region, we are really seeing some of these countries becoming the power houses of the world economy. They are providing a lot of less expensive goods, which helps to keep the lid on inflation. They are also consuming a lot of raw materials and energy, which is pushing oil prices to high levels, as well as metals and food. That, of course, is bad for inflation and a problem that the rest of the world has to cope with. So, the growth is double-edged.

How should investors react to those rising commodities prices?
Commodities have been, and still are, in a long-term bull market, which could probably go on for a magnitude of another three to four years. Or perhaps even a bit longer. Of course there will be cyclical swings within that time and over the next two or three months, we might see a slightly slower period as a result of one of those swings. As a strategic matter, we do believe investors should have exposure to commodities. However, we certainly recommend that they do so through specialist funds, and we advise that they choose those funds pretty carefully. It is a matter of having a fund that is not too heavily weighted toward energy, which some are. Some are better diversified, and there are a number of technical issues to consider, such as the importance of roll-yield. Therefore, I recommend that investors take specialized advice to minimize the reliance on roll-yield in their commodity exposure.

Is there an inflation risk here?
At the moment, it looks as though the inflation risk is not great enough to prevent a Fed cut if it chooses to do so. The Fed and the other central banks must keep an eye on inflation, not least because of those energy and raw materials prices. Currently, those high resource costs don't seem to be feeding into other parts of inflation and this leaves the Fed free to cut rates again if they want to.

The markets have been rallying. Is this a trend that can last?
The equity markets have done very well since that correction was made in August. Since then, we have seen a strong rally and many markets are breaking new highs. I think that is due in part to the fact that for sustainable reasons, the valuations are still not particularly high and because the economic growth outlook, as we discussed, doesn't look bad. We've had a little bit of a slowdown, but overall it’s looking pretty good. In particular, emerging market equities have rallied as well as companies in the developed world that are exposed to the emerging markets. We think that can go on a bit more. It won't be a straight line, of course, but we think the valuations are still attractive and that the growth stories are still there. In addition, there is still liquidity there and a lot of investor money, and that combination can drive prices up further.

Looking to the US, its trade deficit has been falling. What does this reflect?
The decline in the trade deficit is an interesting development because people have been very worried about it for many years. What is happening now is that with the US economy growing slower at a time when the rest of the world - especially Asia - is growing rapidly, a good combination has been created for bringing the deficit down. The slower growth of the US consumer keeps the import growth down, and that strong growth abroad helps to boost exports. And the dollar's weakness is also a bonus because it helps to make US production attractive and competitive, and that further keeps the trade deficit down.

Do you think that the dollar weakness is set to continue?
I think it will. We are not expecting the dollar to see a really big decline, but we do think that the dollar could trade toward the 1.45 mark against the euro. Against the yen, the dollar might see a bit of short-term strength. Although as we get into next year, the dollar could start to weaken against the yen again along with some of the other Asian currencies. So, for the time being it’s a picture of the dollar staying pretty soft, however, the risk of having it collapsing isn't that high.

If the dollar is going to stay weak, is gold a good alternative?
I think gold is beginning to look a little bit expensive. As far as one can measure, it is at a high-level by historic standards when adjusted for inflation. We have been seeing ranges above 730 dollars per troy ounce, and those ranges are more of a holding area rather than a buying one. We do think that some of the other precious metals, such as silver and platinum, can also offer significant value. Those investors looking at precious metals out of concern about the dollar should place less of a focus on gold and more of a focus on some of those other precious metals.

What is your forecast for the bond market?
Quite a question mark remains for longer-dated bonds in the 10-year area and we are not really advising investors to go there. Certainly as we look forward several months, and as the economic outlook becomes clearer, we think there might be some upward pressure on some of those longer yields. However, for the shorter-dated maturities of two to four years in many of the major markets we feel reasonably comfortable with investors having a kind of core holding. Again, we don't think by any means that investors should aggressively hold fixed income rather than equities. We think it is equities that will outperform, but it is good to have an element of fixed income in a portfolio as a balance and that is the maturity range to have.

Can you sum up what all this means for investors?
It is still a healthy environment for investors. We believe that equity portfolios can do pretty well and we believe the credit problems have not gone away, but we do believe they are beginning to subside. There may be one or two nasty announcements yet to surface, but we think the larger parts of these announcements are behind us. It is a world in which the global economy seems in reasonable balance. Of course, there are always risks, including the risk of inflation from that very, very rapid growth in Asia, or the risk of the US or European economies slowing down too much, but at this moment we think that those risks are containable. This leads us to this healthy view for the equity markets, although we are cautious on the dollar and not so excited by the fixed-income world at the moment.

Let's Check out some keywords

2007-11-19T18:35:00.000-08:00

Keywords for this site include: Huntsville Realtor, Huntsville_Real Estate, real estate link exchange, Search Huntsville MLS, free MLS search, Home Value Huntsville AL find home value estimate home value home market value free home value home value appraisal get home value home value calculator Huntsville Alabama Real Estate property management investment property rental homes Real Estate Website Index Huntsville Alabama Rocket City BRAC to Huntsville Relocation Top Web site Customer Service Moving tips real estate news frequently updated brand-new site

NAR: Recovery for Existing-Home Sales in 2008

2007-11-19T12:08:00.000-08:00

A modest recovery for existing-home sales is expected in 2008 as the impact of the credit crunch subsides, while pending home sales indicate near-term stability, according to the latest forecast released here today at the National Association of Realtors® Conference & Expo.
Lawrence Yun, NAR chief economist, said the housing market will improve from a steady unleashing of pent-up demand, and from a wide abundance of safer mortgage products. “The level of pent-up demand reaching the market next year is a bit uncertain, and it is possible for even higher home sales activity than we’re forecasting if buyers regain their confidence about the long-term benefits of homeownership. Over the near term, home sales are likely to be fairly flat as the lingering impact of the credit crunch filters through the system through the end of the year.”
Existing-home sales are projected at 5.67 million this year, edging up to 5.69 million in 2008, in comparison with 6.48 million in 2006 which was the third highest year on record. Existing-home prices are expected to decline 1.7 percent to a median of $218,200 for all of this year and hold essentially even in 2008 at $218,300.
“Some markets are still going strong, such as Austin and Raleigh, while others are showing early signs of recovery, like Denver and Boston. However, a vast portion of the nation’s mid section is underpriced in relation to income, and prices in some markets could rise notably with good local job gains,” Yun said.
“Contrary to perceptions, conventional mortgages are widely available at favorable interest rates for the bulk of home buyers,” Yun said. “The pricing and availability of jumbo mortgages has improved, and FHA loans for home purchases – up 58 percent in the third quarter – are replacing subprime mortgages to serve the needs of low- and moderate-income buyers.”
“Home buyers in it for the long haul nearly always come out ahead in building wealth. Given the leverage in purchasing a home, the average return on a 5 percent downpayment over 10 years is usually three to five times greater than stock market returns,” he said. “When people compare investment returns, they often overlook the power of leverage in the housing market.”
Yun said a $10,000 downpayment on a median-priced home, at a typical appreciation rate of 5 percent, would be worth $110,000 after 10 years. That same amount invested in the stock market for the same amount of time, assuming 10 percent annual appreciation, would be worth $23,600. “That’s why housing is the best long-term investment most families ever make – the longer you own, the better your investment,” he said.

Selling your home during the holidays?

2007-11-14T12:17:00.001-08:00

The holidays can be a great time of year to sell your home. While many real estate agents advocate waiting until February to put a house on the market, statistics from the North Alabama Multiple Listing Service (NALMLS) show November and December to be stronger selling months than January and February. In 2006, the average number of homes sold per month was 1,068. There was only a slight decrease in sales during the holidays, with 931 homes sold during November and 915 sold during December. The true decline in sales is actually during January and February, when people are taking time to recharge from the holidays. January 2006 saw a 31% decrease in sales, with 734 homes and February was just under December with 914 homes sold. Sales of existing homes accounted for 91.4% of sales in November and 91.8% of sales in December, as sales in new home construction.

The advantages of putting your house on the market during this time of year can oftentimes outweigh the disadvantages. During the holidays, sellers will not see as much traffic from people who are “just looking.” Buyers that are looking tend to be more serious, and they have more time to shop together, which is an advantage over other times of the year. Sellers may get dismayed easily, as a result of the slower traffic; however, they should keep in mind that it’s the quality of buyers versus the quantity. In addition, while families with children often prefer to wait until summer to move in order to avoid relocating during the school year, the break between semesters is a convenient time for moving as well. For both buyers and sellers, an advantage to holiday real estate transactions is that real estate agents, as well as lenders, home inspectors, appraisers, and title companies, have more time to spend with clients than at busier times of the year.

Homes that are decorated for the holidays can move buyers to look past any flaws in the home and imagine themselves living in the house. An important tip for sellers is to be tasteful in holiday decorations, as there is the potential for alienating buyers with overwhelming accessories.

The biggest problem sellers face during the holidays is going to be the stress of putting a house on the market, combined with the stress that normally accompanies this time of year. It is of the utmost importance that you keep your home immaculate so it shows well to prospective buyers. As a result of this stress, listing a home during the holidays is not for the faint of heart.

The important thing to remember when you are contemplating whether or not to sell your home is your motivation. If you need to move, regardless of the time of year, it’s always a good time to put your home on the market. If you are contemplating putting your home on the market “just to see what happens,” I would advocate that you wait until you are truly motivated.

What do a Scottish Play and the Boogieman have to do with Real Estate?

2007-11-13T13:25:00.000-08:00

Unless you have experience as an actor, you may not be aware that it is thought to be bad luck – really bad luck – to speak the name of one of William Shakespeare’s most performed plays inside of a theatre. Productions of Macbeth have been plagued with over 400 years of unmitigated catastrophes, so much in fact, that unless actors are rehearsing or performing the play, quoting it is expressly forbidden and even the mention of the title is thought to bring disaster. Actors will instead call it “The Scottish Play” (as it is set in Scotland) and refer to the title character as “The Scottish Lord.”

The play is believed to be cursed, and while I don’t necessarily buy into it, the evidence presents a pretty good case. The night of the play’s first performance in 1606, the actor playing Lady Macbeth became inexplicably feverish and died backstage, forcing Shakespeare himself to fill the role. In 1672, during a performance in Amsterdam, the lead actor substituted a real dagger during a fight scene on stage, and killed another actor in full view of the audience. During an 1849 performance, 31 people were trampled to death when a riot broke out in the theatre. On April 9, 1865, Abraham Lincoln brought a copy of the play with him aboard a riverboat, amusing passengers by reading aloud passages dealing with the assassination of one of the characters. Later that week, John Wilkes Booth assassinated Lincoln in Ford’s Theatre. In 1937, during a rehearsal of Macbeth, a 25-pound weight fell onto the stage, barely missing actor Laurence Olivier. Three actors died during a 1942 production of the play, and the costume designer committed suicide. Charlton Heston suffered severe burns on his legs when his tights caught on fire during a performance in 1953, due to the fact that they had been “accidentally” soaked in kerosene. At the Metropolitan Opera in 1988, a production of Macbeth was cancelled at intermission when an audience member plunged to his death from the top balcony into the orchestra pit.

The legend surrounding the curse states that Shakespeare used actual Wiccan incantations in the play’s text, thus angering evil spirits. If someone quotes “The Scottish Play” inside the theatre, or refers to it by name, there are steps of recourse the offender must take, which include spitting on the ground, turning around three times, and reciting a line from Shakespeare’s Hamlet, “Angels and ministers of grace defend us!”

It may sound odd, but actors get very paranoid about this curse, and theatre accidents are often attributed to the curse of that Scottish play. It’s not illogical to assume, however, that the paranoia more than the curse may cause such accidents to occur.

Now, by this point, 476 words into the article, you may be wondering what this all has to do with real estate. This paranoia and fear surrounding the curse of Macbeth has resulted in some serious accidents. Much the same way, the paranoia and fear surrounding the current real estate market can be dangerous. I’d like to talk about a word that makes real estate agents (and economists, and investors…) a little paranoid and scared, the “R” word. That’s right, Recession. It’s being used a lot in the media lately, without much quantitative substantiation to support the claims.

The very existence of this word is a Catch-22. The first speculative pundit to mention “recession” should be beaten, because once its brought up, the conversation goes like this:

News Anchor 1: Well, looking at the polls, the Republicans/Democrats/Purple People-Eaters are gaining speed against the incumbent party. What would really trip up [insert incumbent candidate/party name here] is if we headed into a recession…
News Anchor 2: You really think a recession is possible at this point? I mean, the economy is doing so well…

Sooner or later, news broadcasts start off saying things like, “We’re starting to hear a lot of talk about recession…” Suddenly, all this recession-talk in the news has people scared, and little things (i.e. dips in the stock market, a bad month or two in the housing market) have consumers fearing that we are indeed going into a recession, just like everyone says! Consumer confidence suffers, people stop spending money, and BAM! – recession¹ .

If my Macbeth analogy didn’t quite do it for you, maybe this next example will: Have you ever told a seven-year old a horror story right before bed? I found that if you want to guarantee a child will not go to sleep, telling them a horror story about the boogieman will pretty much do it. They lay awake in bed, thinking about your story over and over again, until they run out of their room, convinced they saw a monster in their closet. I think this is a fairly decent analogy, except in this example, the media is the babysitter, you and I are the seven-year old kid, and the fear of a recession is the boogieman. Whether there’s a monster in the closet or not, people get scared and run out of their bedroom (read: stop buying houses, pull their money from investments, etc.). This is how fear of a recession, causes a dip in consumer confidence, which leads to decreased spending (because people are scared), which triggers an actual recession² .

This is ridiculous. Let’s look at the GDP growth for 2007: 1st Quarter: +1.3%, 2nd Quarter: +3.8%, 3rd Quarter: +3.9%.
I’m not seeing a recession yet.

It is your job as a real estate professional who is armed with actual knowledge to shine your flashlight into the closet and show your clients that there is no boogieman hiding in there. If all else fails, the next time you hear someone use the “r” word, from here on out labeled as “the word of which we will not speak,” spit on the ground, turn around three times, and start reciting lines from Hamlet.

¹ At this point, the author would like to acknowledge the use of the slippery slope rhetorical fallacy for illustrative purposes. A recession is defined as a negative growth in the GDP for two or more successive quarters in year. No, recessions don’t happen if the NASDAQ falls two points on a Wednesday.

² See above footnote. Seriously, folks, just making sure my bases are covered. You cannot trip and fall and cause a recession (although, in his day, it might have been possible for Allen Greenspan to trip and fall and cause one…).

U.S. Macro Outlook – Still Moving, but Vulnerable

2007-11-09T13:01:00.001-08:00

From the Mark Zandi over at Moody's Economy.com:

The economy remains resilient to the ongoing subprime financial shock. Growth is slowing, but the sturdy 166,000 October payroll job gain suggests threats to the expansion are receding. Recession odds have fallen to less than one in three, from a peak above 40% during the height of the financial turmoil.

Recent confidence surveys indicate that businesses are nervous, and hiring less aggressively. Yet aside from those in housing-related sectors they aren’t worried enough to lay off workers. Investment is also sturdy, particularly in commercial structures such as office buildings and hotels. Businesses are loath to cut expansion plans given record profit margins and healthy balance sheets. Earnings growth has slowed sharply, but at least so far, firms are gracefully weathering the financial turmoil.

Great insight, Mark! It's so nice to hear an honest assessment of the current market situation, with a nod to the fact that consumer confidence is the real concern here!

I remain steadfast in my conviction that if everyone would stop crying about the "collapse" of the housing market, the economy will continue to progress in normal market-cycle fashion.

Market Comparison Exercise

2007-11-09T12:53:00.000-08:00

Market Comparison Exercise¹

A home with a market value of $188,000² in Huntsville, Alabama would be expected to cost approximately…

$206,800	in	Mobile, AL
$210,560	in	Nashville, TN
$289,520	in	Atlanta, GA
$552,720	in	San Diego, CA
$567,760	in	Miami, FL
$718,160	in	Washington, DC

¹Resource: Coldwell Banker’s Home Price Comparison Index
²Average Huntsville, AL sales price year-to-date according to NALMLS

Freddie Mac Primary Mortgage Market Summary

2007-11-09T12:11:00.000-08:00

Freddie Mac (NYSE:FRE) released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 6.24 percent with an average 0.4 point for the week ending November 8, 2007, down from last week when it averaged 6.26 percent. Last year at this time, the 30-year FRM averaged 6.33 percent. The 30-year FRM has not been this low since the week ending May 17, 2007, when it averaged 6.21 percent.

The 15-year FRM this week averaged 5.90 percent with an average 0.5 point, down from last week when it averaged 5.91 percent. A year ago, the 15-year FRM averaged 6.04 percent. The 15-year FRM has not been this low since the week ending May 10, 2007, when it averaged 5.87 percent.

Primary Mortgage Market Summary

November 8, 2007

	30-yr	15-yr	5/1-yr ARM	1-yr ARM
Average Rates:	6.24%	5.90%	5.89%	5.50%
Fees & Points:	0.4	0.5	0.5	0.6

*Freddie Mac's Primary Mortgage Market Survey® (PMMS®) surveys lenders each week on the rates and points for their most popular 30-year fixed-rate, 15-year fixed-rate, 5/1 hybrid amortizing adjustable-rate, and 1-year amortizing adjustable rate mortgage products. The survey is based on first-lien prime conventional conforming mortgages with a loan-to-value of 80 percent. In addition, the adjustable-rate mortgage (ARM) products are indexed to constant-maturity U.S. Treasury rates and lenders are asked for the both the initial coupon rate and points as well as the margin on the ARM products.

Chart of the Day

2007-11-09T09:15:00.000-08:00

More proof that the market is in a disastrous condition – wait – five-year up trend? The market is at an all-time high? Where is this in the newspaper?

Thanks to our friends over at Chart of the Day for such great information!

Can't get enough real estate news?

2007-11-08T07:40:00.000-08:00

There are some amazing sites out there regarding real estate. You could waste hours on these sites and even longer finding them. That's why periodically, I'll provide links and reviews of these sites for you.

First up: IntoTheBox.tv

IntoTheBox started in September, and provides daily videos (they are amazing! Daily? Really?) as well as a blog to discuss real estate in New York City. My favorite so far? An analysis of a marketing campaign for an apartment that claims, "If God had an apartment, this would be it."

While the Huntsville, Alabama market is certainly different from NYC, I think everyone can get some daily enjoyment from the videos and blog!

The Politics of Real Estate

2007-11-07T12:05:00.000-08:00

If you listen to the news lately If you’re capable of breathing, you know that we’re in end times. The economy is in the toilet, and the value of the dollar is so low, people are using it for kindling in their fireplaces. The real estate market is in such a state that realtors are jumping to their deaths out of the windows of their open houses, and we’ve all heard the story about the couple in Pittsburg that is offering a refund to anyone who buys their house upon the couple’s death. It’s bad, it’s bad, it’s bad.

What can we do? Vote for Hillary in 2008. Or Obama. Or McCain. Or Giuliani. That’s right, the “It’s the Economy, Stupid” game gets played close to every major election, which would include every presidential election and every midterm election that could possibly change the make-up of Congress. Here are the rules: You and your friends are not in power. Convince everyone that things are bad, oh so bad. Then tell everyone that it’s the fault of the people in charge. Promise everyone that if they vote for the cool kids, things will get better. Lather, rinse, repeat – every election cycle.

Essentially, political candidates tell the public, “It’s been bad, I’ll make it better.” It’s how Bill Clinton won the presidency in ’92, it’s how the Republicans won back Congress in ’94 – This game is so played, it’s how Franklin Delano Roosevelt beat Herbert Hoover in 1932 (remember the song “Happy Days Are Here Again?” Roosevelt’s campaign theme song.)

How do you do this if the economy isn’t actually bad (after all, FDR didn’t have much of a hard time proving the economy wasn’t doing too well under Hoover – Great Depression anyone?)? Do you unplug all the computers on Wall Street? Do you bribe Ben Bernanke (Chairman of the Fed) to increase interest rates to 20 percent? Do you hold all of the Fortune 500 CEOs hostage and demand a ransom of $50 trillion be sent to a cover organization in Kuala Lumpur? No, there are much easier ways to affect the economy without having to spend a single dollar (it allegedly won’t buy you much anyway).

Regardless of the actual economic situation, if you continually tell everyone that things are bad, eventually they start to believe it (think of the American public like a teenage girl with low self-esteem). When the public starts to believe things are bad, consumer confidence goes down. When consumer confidence goes down, people start to spend less money. According to the Mortgage Banker’s Association, consumer spending comprises 70% of the GDP. This “let me hoard all of my food for the long, cold winter ahead” mentality has a real and measurable effect on the economy. It’s gonna be a hard-candy Christmas, kids.

As people get scared, they stop spending money on luxuries and focus only on the necessities. That’s why people aren’t buying houses, and that’s why I have to stand in line for 20 minutes every morning to get my five-dollar coffee at Starbucks®. Wait. That can’t be right. In a bad economy, people don’t drink Starbucks® because they are saving money for more important things like bread. In a bad economy, people leave their SUVs strewn on the interstate because they cannot afford to buy gas. In a bad economy, people don’t even watch television, because they can’t afford basic cable – they read books. In a bad economy, people don’t buy iPods or iPhones, and they invest in sensible commodities instead of intangible products like Google (debuted in 2004 at $85 a share; currently trading at $739.82).

Before you buy into the Armageddon rhetoric that has been manufactured to supplement the current election cycle, ask yourself the following questions:

1. In light of the “current economic conditions”, have people stopped driving SUVs/watching TV/consuming extremely overpriced coffee-style beverages?
2. Are economic conditions so bad that you notice a dearth of Harvard MBAs that can’t find jobs because the Fortune 500s stopped hiring?
3. Rather than hearing conversations that start with, “Did you see Dancing with the Stars last night?”, do you overhear more conversations in which people say, “The fourth time I read War & Peace just shed so much light on Tolstoy’s theme of the irrationality of human motives”?

If all else fails, just hold out until January 2009 – that’s when the newest occupants of the White House and Congress will be singing, “Happy Days Are Here Again.” In the meantime, you can actually do something to affect the economy. Remember all that talk about consumer confidence? You have the power to affect it. Get out there and start building it! Yes, buying five-dollar coffee is one way, but the best way is to contact your sphere of influence and tell them what’s really going on! In your Holiday letters to friends and relatives, tell them about the great deals they could get as investors in this wonderfully undervalued market! This real estate market is like the quiet guy in high school – no one’s interested until the Head Cheerleader develops a crush on him – suddenly, everyone wants a piece. The Huntsville real estate market is a well-kept secret that you’d like to let people in on, so they can get the deals before the mad rush (read: BRAC).

If consumer spending is 70% of the GDP, and spending is down as a result of low consumer confidence, all we need is a little attitude adjustment to make a huge change. You can make this change happen!

Economics 101 - What is GDP?

2007-11-06T15:39:00.001-08:00

The growth of an economy is measured in terms of an increase in the size of a nation’s economy. A broad measure of an economy’s size is its output. The most widely-used measure of economic output is the Gross Domestic Product, abbreviated GDP.

GDP is generally defined as the market value of the goods and services produced by a country. It is one of the primary indicators used to gauge the health of a country’s economy. Strictly defined, GDP is the sum of the market values, or prices, of all final goods and services produced in an economy during a period of time. In short, everything produced by all the companies and all the people in a given country (i.e. the United States).

There are three important concepts to note with regard to this definition:
• GDP is a number that expresses the worth of the output of a country in local currency.
• GDP tries to capture all final goods and services as long as they are produced within the country, thereby assuring that the final monetary value of everything that is created in the country is represented in the GDP.
• GDP is calculated for a specific period of time, usually a year or a quarter of a year.

While there are many ways to calculate GDP, the most common approach to measuring and understanding GDP is the expenditure method:

GDP = consumption + investment + (government spending) + (exports – imports)

Usually, GDP is expressed as a comparison to the previous quarter or year. For example, if the year-to-year GDP is up 3%, this is thought to mean that the economy has grown by 3% over the last year.

As you can imagine, economic production and growth, what GDP represents, has a large impact on nearly everyone within that economy. For example, when the economy is healthy, you will typically see low unemployment and wage increases as businesses demand labor to meet the growing economy. A significant change in GDP, whether up or down, usually has a significant effect on the stock market: a bad economy usually means lower profits for companies, which in turn means lower stock prices. Investors really worry about negative GDP growth, which is one of the factors economists use to determine whether an economy is in a recession.

How does GDP affect the US economy?

Investors look at GDP growth to see if the economy is changing rapidly so they can adjust their asset allocation. In addition, investors compare country GDP growth rates to decide where the best opportunities are. The Federal Reserve (Fed) uses the GDP growth rate as one of the indication of whether the economy needs to be restrained or stimulated.

How does GDP affect real estate?

If the GDP growth rate is speeding up, the Fed may raise interest rates to stem inflation. In this case, homeowners would want to lock in a fixed-rate mortgage, because they know that an adjustable-rate mortgage will start charging higher rates next year.

Subprime Market Information

2007-08-09T05:14:00.000-07:00

Lately, the news has focused on the collapse of the subprime market. We all know that subprime mortgages have been at the center of controvery, but what exactly are they? Jack M. Guttentag, Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania, and founder of GHR Systems, Inc., answers these questions for us on the Mortgage Professor's Web site.

The Open House: Ok, what is a subprime lender?
Jack Guttentag: A sub-prime lender is one who lends to borrowers who do not qualify for loans from mainstream lenders. Some are independent, but increasingly they are affiliates of mainstream lenders operating under different names.

Sub-prime lenders seldom if ever identify themselves as such. The only clear giveaway is their prices, which are uniformly higher than those quoted by mainstream lenders. You do want to avoid them if you can qualify for mainstream financing, and I’ll indicate how shortly.

There are lenders who offer both prime and sub-prime loans, and one of them is referred to below. For borrowers who aren't sure where they stand, dealing with a lender who offers both has a distinct advantage. They will try to qualify you for prime and only if that fails will they drop you to subprime. Lenders who are strictly subprime might refer a prime borrower to an affiliated prime lender, but their financial interest dictates otherwise.

TOH: So what exactly is a subprime borrower?
JG: A subprime borrower is one who cannot qualify for prime financing terms but can qualify for subprime financing terms. The failure to qualify for prime financing is due primarily to low credit scores. A very low score will disqualify. A middling score might or might not, depending mainly on the down payment, the ratio of total expense (including debt payments) to income, and ability to document income and assets.

Some other factors can also enter the equation, including purpose of loan and property type. For example, a borrower who is weak on some but not all of the factors indicated in the paragraph above might squeak by if purchasing a 1-family home as a primary residence. But the same borrower purchasing a 4-family home as an investment might not make it.

TOH: What are the terms for subprime lending?
JG: Sub-prime lenders base their rates and fees on the same factors as prime lenders. For example, rates are higher the lower the credit score and the smaller the down-payment. However, the entire structure of rates and fees is higher at sub-prime lenders to cover the greater risk and higher costs of sub-prime lending.

A higher percentage of sub-prime than of prime loans go into default. Sub-prime lending costs are also higher because more applications are rejected and marketing costs are higher.

Among subprime loans that don’t default, a higher percentage prepay early. Prepayment penalty clauses are often mandatory, and a high percentage of subprime loans have them. On the other hand, escrow of taxes and insurance, which is required in the prime market unless the borrower pays for a waiver, is often not required in the subprime market.

TOH: What is the problem with these loans?
JG: The development of the sub-prime market has made mortgages (and home ownership) available to a segment of the population that otherwise would have been shut out of the market. That’s the good news. The bad news is that some borrowers who are eligible for loans from mainstream lenders end up in the sub-prime market. They are prime borrowers but they pay sub-prime prices.

This happens partly because of the difficulties some borrowers can have in determining whether or not they qualify in the mainstream market. Underwriting requirements can differ from one mainstream lender to another, so it is quite possible that a borrower with problems, who is not eligible at one lender, will be eligible at another.

However, the main reason some prime borrowers end up paying sub-prime prices is that they are solicited by sub-prime lenders and go along with the deal pitched to them without ever contacting a mainstream lender. This is sometimes refer red to as "steering". Very few sub-prime loan officers will give up a commission by referring a qualified applicant to a mainstream lender. The deal will very likely go down at sub-prime prices, therefore, regardless of how qualified the borrower may be.

Sub-prime lenders market aggressively to home-owners who already have mortgages. A major pitch is the cash that borrowers can take out of their properties through a cash-out refinance. Another common pitch is the lower payments possible on interest-only mortgages and option ARMs.

These lenders target groups and areas that promise to have many sub-prime borrowers – lower-income black neighborhoods, for example. Many occupants of such neighborhoods will be sub-prime, but those who aren’t and who go along with the soliciting firm will pay sub-prime prices.

TOH: Do you have any suggestions or guidelines for people that want to protect themselves?
JG: Never respond favorably to a solicitation without first checking other options. If you deal with only one loan provider, your prospects are better if you make your selection by throwing a dart at the yellow pages than by accepting a solicitation.

Check your eligibility for mainstream financing with mainstream lenders. The easiest way to do that is on-line. Some sites that I like for this purpose are Eloan.com, Amerisave.com, and NationalMortgageAlliance.com. These are all Upfront Mortgage Lenders.

If you can’t qualify with any of them, your best bet is an Upfront Mortgage Broker (they are listed on my web site ). They may charge sub-prime applicants a little more because they require more time. You will know what they charge, however, and you will know that you are getting the wholesale price posted by the lender, which means you won’t be exploited.

Good News in Real Estate

2007-08-07T08:33:00.000-07:00

We've heard a lot of bad news about real estate lately, but Jim Weichert of WEICHERT, REALTORS® has issued a statement regarding some positive economic indicators about the real estate market.

-The stock market had a strong surge on Tuesday fueled by positive inflation news and an increase in personal spending according to the Associated Press.
-The National Association of Realtors announced Wednesday that the Pending Home Sale Index saw a 5 percent increase in June, the largest monthly gain in more than three years.
-Consumer confidence rose to 112.6 in July - a six-year high and up from 105.3 in June.
-The Conference Board Consumer Research Center also reported that consumers were considerably more positive about both current-day conditions (Present Situation Index) and short-term outlook (Expectations Index).

Welcome!

2007-07-31T09:31:00.000-07:00

Welcome to The Open House Blog! This will be a unique forum that provides information and discussion about real estate in Huntsville, Alabama, as well as real estate trends nationwide. We will also discuss local events in Huntsville, in order to provide information to those planning to move to the area.

We will update frequently, with news, as well as interviews with pertinent real estate and local personalities.

Happy Reading!